Question

The short-run aggregate supply curve has a(n) ________ slope because as prices of ________ rise, prices of ________ rise more slowly.

Answer 1

According to macroeconomic principle, the short-run aggregate supply curve has a Positive slope because as prices of final goods and services rise, prices of inputs rise more slowly.

This is based on the idea that the short-run aggregate supply curve shifts by changes in price level and production.

Thus, the Short-run aggregate supply curve is represented as Y = Y* + α(P-Pe).

• Here, Y => the production of the economy;

• Y* => the natural level of production, and the coefficient is positive;

• P => the price level;

• Pe => the expected price level.

Hence, in this case, it is concluded that the short-run aggregate supply curve is a significant detail to be noted in the economic analysis of business production.

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